Arts United States. Congress. Senate. Committee on Labo.

Education's impact on economic competitiveness : hearing before the Subcommittee on Education, Arts, and Humanities of the Committee on Labor and Human Resources, United States Senate, One Hundred Fourth Congress, first session ... February 2, 1995 online

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Online LibraryArts United States. Congress. Senate. Committee on LaboEducation's impact on economic competitiveness : hearing before the Subcommittee on Education, Arts, and Humanities of the Committee on Labor and Human Resources, United States Senate, One Hundred Fourth Congress, first session ... February 2, 1995 → online text (page 10 of 15)
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about S31,300 in 1993 dollars.

A third study has ^Tramm^rf the effect of different types of academic and technical competencies on
hourly wage rates and annual earnings of young people in 1981, 1982, 1983, 1986, 1989 and 1991 (Bishop 1994).
The effects of a one population standard deviation [approximately 5 Grade Level Equivalents (GLE)] increase
in various kinds of achievement are presented in Figures 6a, 6b. 6c and 6d. At the time of the 1991 interview



' All of the present values calculated in this paper assume that employer paid taxes on labor and fringe
benefits sum to 25 percent of earnings, working lifetimes are 45 years on average and a 5 percem real rate of
discount Thus the formula for PDV = [earnings differenriai)*1.25*20*.895. The calculations also assume no
growth in the magnitude of the differential being valued. In reality both inflation and productivity growth will
cause all wage differentials to grow over time at roughly the rate at which nominal wages grow. This means that
our calculations are conservative and comparable to PDV estimates which assumed nominal wage growth of 3
percent per year and which use an interest rate of 8 percent, the current coupon on long term government bonds.



64



Table 2

Alternative Estimates of the Present Discounted Value

of Earnings and Productivity Effects

of 1 Grade Level Equivalent of General Academic Achievement

(Holding Years of Schooling Fixed)



Female/
Qerical



Weekly Earnings of Adiilt Household Heads —

(Panel Study of Income Dynamics-Bishop 1989)

Annual Earnings of the Employed S20,100

(NCES Literacy Survey 1994)

Earnings of Youth- 17-26 yr olds in 1981-85 S 6,900

(Nat Long, Survey of Youth-Bishop 1994 Chap 5)

Earnings of Young Adults-25-32 yr olds- 518,200

(1990 NLS-Y-Bishop 1994 Chap 5)

Skill Qualification Tests in Military Holding 522,400

Job Fwed (Maier & Grafton-Bishop 1994 Chap. 7)

Performance Ratings in Civilian Jobs- Job fixed 514,200

(General Aptitude Test Battery-Bishop 1994 Chap 8)



Male



Tech Abil
not Incl.

532,000
520,100
5 2,900
513,400
516,100
515,600



Tech. Abil
Included



510.600



523,500



531,900



Estimaces of the present discounted value (PDV) at age 18 (using a i percent reaJ discount rate and a 4S year working
life) of the compensation and productivity effects in 1992-93 dollars of a one grade level equivalent (GLE) increase in
general academic achievement (GAA) while holding years of schooling constant. By comparison the instructional cost
of one year of school was $5566 in 1992-93. PDV is calculated attnmmmg chat the earnings/productivity differential
is the same in every year of the individual's woridng life. Compensation (including employer paid taxes on labor) is
assumed to be 25 percem greater than earnings. A grade level equivalent is defined as equal to l/5th of a PopSD.
General academic achievement includes computational speed, mathemabcal reasoning, verbal ability and science
knowledge. Results for a broader definition of GAA that also includes mechanical comprehension and technical
knowledge is presented in column 3. Spatial ability, perceptual ability, clerical speed and psychomotor skills were not
considered part of GAA and their effects were controlled for in the GATB analysis. All models reported here included
controls for years of schooling. Only the PSID analysis correaed for errors in measuring GAA, so ^


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Online LibraryArts United States. Congress. Senate. Committee on LaboEducation's impact on economic competitiveness : hearing before the Subcommittee on Education, Arts, and Humanities of the Committee on Labor and Human Resources, United States Senate, One Hundred Fourth Congress, first session ... February 2, 1995 → online text (page 10 of 15)